It’s an election year, so it’s not surprising to hear politicians in both parties making new promises about putting Americans back to work. But it is puzzling and distressing, as the economy continues to stagnate, to hear President Obama proposing to single out domestic energy producers for blatantly discriminatory tax treatment. A new study by LSU economist Joseph Mason suggests that this proposal, contained within Obama’s 2011 budget, will lead to the loss of 155,000 jobs next year, with at least one-third of those in the already devastated Gulf Coast states. It would also result in an estimated $68 billion in lost wages nationwide, according to Mason, who used the U.S. Commerce Department’s econometric model for his projections. Another $18 billion would be lost to state and local governments.Let us be clear, as Obama so often says: He is not proposing to close some special loophole that benefits only oil, coal and natural gas companies. Rather, he wants to exclude them — most are small to medium-sized independent operators — from tax breaks that are available to nearly every other manufacturer and producer. The first of these is the so-called “Section 199 deduction,” which allows engineering and architectural firms, software companies, construction companies, filmmakers and even members of agricultural cooperatives, among others, to deduct an amount equal to 9 percent of their production receipts on their taxes. Excluding oil and gas producers from that deduction would cost them hundreds of millions and kill thousands of desperately needed jobs.
Obama also wants to change the so-called “dual capacity tax credit,” which allows larger American oil companies to operate on a level playing field with foreign competitors when they do business abroad. Under Obama’s changes, the U.S. companies would effectively be double-taxed on income earned in countries that tax oil and gas production but not individual income. This would be particularly damaging to U.S. companies trying to compete against foreign state-owned oil companies such as Venezuela’s Petroleos and China’s CNOOC.
Mason’s 40-page study starkly lays out the potential consequences of these two planned tax changes. Obama has added almost a trillion dollars to the national debt just with his failed economic stimulus package of 2009, making him desperate to do something to increase government revenues. Destroying jobs and paychecks for the very people and companies that keep our lights and air conditioning on, our cars and trucks running and the wheels of our commerce turning is the wrong way to do it. American Energy Alliance CEO Tom Pyle has it right when he says “this tax grab merely represents punitive policies that are now finding a place in the sun in the post-BP oil spill crisis political environment.”
